Other economists have said the dollar, if measured using PPP and using regular consumer goods and services that Australians buy or use, still has some way to fall to reach fair value.

"Australia's very expensive. The level of the Australian dollar which would be fair from a PPP-perspective is around about 75 to 80 US cents," ANZ currency strategist Andrew Salter said.

"That's based on relative consumer prices in Australia and the United States. That's a pretty stable relationship. In fact, the IMF and the World Bank, the Wharton Business School and HSBC also put PPP fair value within that range."

The idea of fair value for a currency is also one that is hotly debated among analysts. Measures used to judge the strength of currencies include PPP and the Real Effective Exchange Rate (REER) - the exchange rate against a range of currencies, adjusted for inflation.

The Australian dollar, when compared to the level of commodity prices - which surged to records-high before weakening in recent months, could also be seen as closer to its fair value than using the PPP models, Mr Salter said.

"If you take into account commodity prices and the interest rate differential - the two things that jointly determine longer-term fair value for the Australian dollar, we put that at around about 88 to 90 US cents.

"On that basis, we are not too far over-valued at the present time."

Dollar far higher than its historical average

What is clear is that the Australian dollar has soared above its long-term historical average in the 70s US cents range following the start of the mining investment boom, RBS senior currency strategist Greg Gibbs said, citing Bank for International Settlements' (BIS) effective exchange rate indices. The BIS looks at up to 61 currencies since the 1960s and using weights based on trade data in 2008 to 2010.

“Over the last 20 years, the Australian dollar still sits in real effective terms, judging by the BIS index, around 30 per cent above its average,” Mr Gibbs said.

"If you had record interest rates and a currency that was somewhat average, you would anticipate that the economy would be grower much faster than it is. All the evidence would suggest that the currency is still restraining the economy.”

Key factors that could determine the trajectory of the dollar over the next few years included the terms of trade, the end of the mining investment boom and the shift towards an increase in export volumes in the next phrase in the development of the resources sector, Mr Gibbs said, citing a fair value of the Australian currency about around low-80s US cents.

The Australian dollar fell to a low of 89.01 US cents in August from a high of 105.98 US cents in January, but has recently regained some of its value. The dollar was buying 94.18 US cents about 1.45pm today.

Despite the slide, the Reserve Bank continued to say that the currency could fall further to assist with the rebalancing of the Australian economy away from mining-led growth.